Eftpos is pushing ahead with its plan to claw back its dwindling market share, hiring Dutch software company Bell ID to build its mobile payments and online security system to take on giants Visa and MasterCard.

This will allow consumers to make contactless debit payments using eftpos from their mobile devices by May 2016, most likely first at the big supermarkets Coles and Woolworths, two of its shareholders along with the banks.

Eftpos hopes to make extra money by selling its tokenisation service to banks and merchants. Photo: Supplied

Eftpos will also join the battleground over who owns the so-called "token vault", a behind-the-scenes system that allows for the authentication of mobile payments. It will sell the authentication service to banks and merchants in competition with Visa and MasterCard and the banks' systems.

"This new capability will enhance competition in the Australian mobile payments market and help eftpos meet the growing needs of this rapidly changing area of payments technology. It will also provide the Australian industry with the choice of a domestic, secure tokenisation service, " said Bruce Mansfield, the managing director of eftpos.

The tokenisation service is a security feature using tokens (in effect another security number) based on the original eftpos card number. This token system gives added protection to consumers.

Visa and MasterCard have been trying to persuade banks to store the security tokens with them rather than the banks doing it themselves, arguing that this is simpler and ultimately less costly for the industry. However, the banks would have to pay them extra fees for the service.

Host card emulation

For debit transactions, eftpos will offer a single, Australian token vault for banks and merchants in Australia. However, it will use a system called host card emulation, which is not used by Apple. HCE, already used by the Commonwealth Bank of Australia and Westpac, creates a digital copy of the card and stores its information in a data centre rather than on the card.

Google, however, has included HCE in its latest operating system updates. It recently launched Android Pay, which it began offering for the first time in early September in the US.

"The tokenisation service will compete with others in the market and will also be available as a white label product, " an eftpos spokesman said.

Bell ID is also behind the mobile payments of ANZ Bank (also an owner of eftpos), which began offering tap and go payments via its goMoney app in March.